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Business

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Chrysler posts 16% gain despite supply problems

– Chrysler is having some growing pains.

The country’s third-largest automaker said Tuesday that its sales picked up in the second quarter, thanks to strong U.S. demand for trucks and SUVs.

But the company cut its target for full-year sales and profit, blaming persistent problems as it adds more shifts and ramps up production of vehicles like the Ram pickup and the Jeep Cherokee small SUV.

“You need to remember that in 2010 we produced 1 million cars. We’re now at 2 1/2 times that level,” Chrysler CEO Sergio Marchionne said in a conference call with analysts and media.

Marchionne said making sure Chrysler has enough parts from suppliers has been a problem. It’s also working out the bugs in new components. Engineers are still making adjustments to the Cherokee’s new nine-speed transmission, for example, even though the first Cherokees began rolling off the line in June.

Chrysler is also adding more workers, like the second shift of 1,100 people who will start making Cherokees next month and the 1,250 people who will start making transmissions in Kokomo, Ind., early next year.

Chrysler isn’t the only automaker who has had problems ramping up production. Ford Motor Co. delayed the launch of the new Lincoln MKZ sedan this spring because of production and quality issues.

Chrysler’s first-quarter sales suffered because it was slow to release new versions of the Ram pickup and Jeep Grand Cherokee SUV, two of its most popular vehicles.

Those production issues were resolved by the second quarter. U.S. Ram sales rose 30.4 percent over last year. It was the Ram’s best second quarter since 2007. Grand Cherokee sales soared 27 percent.

Chrysler said its net income rose 16 percent to $507 million in the April-June period from $436 million a year ago. It was Chrysler’s eighth straight quarterly profit.

Revenue rose 7 percent to $18 billion from $16.8 billion.

Chrysler still expects full-year revenue of $72 billion to $75 billion. Chrysler CFO Richard Palmer said customers are adding more features and paying more for their vehicles, so even if sales slide, revenue won’t. Buyers paid an average of $29,100 for Chrysler vehicles in the second quarter, up $800 from last year, the company said.

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